Fee-for-service insurance is the traditional method used by health insurance companies of charging for health care. Under this method, patients get the benefit of having more options when it comes to treatment decisions since they can go to any doctor and hospital that they want to. Despite this very nice advantage, fee-for-service insurance health care is no longer widely used and has been overshadowed by the use of managed care plans. The reason for this transition is mostly due to coinsurance.
Coinsurance is the amount the patient has to shoulder. Usually, if the patient has a reimbursement plan, the insurance company only reimburses 80% of the doctor’s bill, making the coinsurance 20%. However, if the doctor charges a steeper price than the going rates determined by the insurance company, the patient has to shoulder the rest of the bill. This can leave the patient with very steep medical bills despite having health insurance coverage.